CHRONIC liquidity constraints on the back of continued economic implosion saw the Zimbabwe Stock Exchange turnover for October at US$12,8 million, reaching the lowest figure in six years as the future of nearly 80% of stockbrokers comes under threat, Zimbabwe Independent can report.
Bernard Mpofu/Fidelity Mhlanga
The underperformance of the local bourse — a key economic performance barometer — continues to reflect a slowdown in economic growth after total market capitalisation eased by 0,8% to US$3,6 billion from US$3,63 billion, marking a persistent bearish run for eight consecutive months .
According to ZSE figures obtained by the Independent, the lowest turnover recorded since the market started trading in multiple currencies on February 9, 2009 was recorded in April of the same year when the value of shares traded stood at US$11,6 million.
Following a two-month suspension preceded by an unprecedented economic meltdown characterised by runaway hyperinflation and acute foreign currency shortages, the ZSE resumed trade in 2009 with monthly turnover standing at US$2,5 million before registering an increase of US$500 000 in March.
The highest turnover since the multi-currency system was introduced was recorded in January last year when shares worth US$64 million exchanged hands.
The sagging turnover on the ZSE now poses a threat to brokerage firms whose lifeblood is commissions generated from either side of trades—buying and selling.
On a month-on-month comparison, turnover fell by 25,84% to US$12,8 million; average daily trades in October came in at US$585 520.
Turnover which averaged US$2,5 million daily six years ago dropped to US$71 197 on October 26, reflecting the cake was getting smaller for stockbrokers.
According to ZSE chief executive Alban Chirume at current trading levels, only a fifth of Zimbabwe’s stockbrokers are generating enough commission to survive.
Weak trades and immense competition for scarce investors has seen some brokerage firms such as Kingdom Stockbrokers, ZB Stockbrokers and New Africa folding since the advent of the multi-currency system. A bullish run which followed the multi-currency regime was not enough to keep the firms afloat.
The country’s 13 securities dealers charge 0,92% for either buying or selling shares for every trade.
Securities and Exchange Commission of Zimbabwe chief executive Tafadzwa Chinamo said while a decline in turnover could affect the viability of brokers, the setting up of an automated trading platform and a central securities depository would lower operating costs for brokerage firms.
“It is inconceivable to think that stockbrokers will not be affected by a decline in their topline,” Chinamo said.
“The influence that we have on brokers is on how they conduct themselves and having measures to lower their back office costs as seen by the setting up of the Central Securities Depository and the Automated Trading System.”
Local brokerage firm IH Securities in its monthly research note said utility issues such as lack of energy could further slowdown economic growth and the performance of the ZSE.
“The market maintained a downward trend, falling yet again for the eighth consecutive month; total market capitalisation closed 0,8% lower at US$3,60 billion,” IH said.
“October was defined by severe power deficit issues in Zimbabwe as water levels at the Kariba Dam continued to fall affecting the country’s hydroelectricity generation.
“As a result there was a notable increase in daily power cuts; mining and industrial companies were particularly affected as government reduced supply by close to 40% in order to service residential areas that were getting 18 hour power cuts.”
The mining index dropped 3,24% to 23,57 on the back of a 7,14% loss in Bindura.
On the upside Innscor, which became the first listed concern to breach the US$1 billion mark in revenue, gained 2,46% with Econet firming by 0,19%.
The month’s top gainers were Fidelity Life up 22,78%, CBZ gained 19,05%, African Distillers firmed 17,5% and Ariston surged 15% and NMB grew 12,5%.
The top fallers were Turnall and Zimpapers both down 20,005, Rainbow Tourism Group falling 19%, NTS dropped 15% and Colcom tumbled 12,21%.